Posts Tagged ‘russia car sales’

Workers on the line at the Ford plant in St. Petersburg, where 700 jobs are being cut.

The temperature might finally be warming up after the frigid Russian winter, but the country’s auto industry is suddenly feeling a big chill.

Russia has been the target of increasing sanctions in the wake of its disputed annexation of Ukraine’s Crimean Peninsula and the threat that Russian President Vladimir Putin might send troops into the neighboring country in an expanded land grab. That has led to a flood of capital leaving the country and signs that the crisis could strike hard the Russian economy.

The crisis is causing “uncertainty in the marketplace,” warns consulting firm Accenture.

The Last Word!

Ford sent a chilling signal this week when it announced plans to trim 950 jobs at its two Russian plants, including 700 full-timers at its primary facility in St. Petersburg – almost one in five of its employees in the country. The maker is blaming an already weak economy, as well as the weak Russian ruble, but observers warn that this could be just the first sign of a serious setback for the country’s auto industry – especially if the Ukrainian crisis drags on, or rose, escalates.

Sales have been slow at showrooms, like Moscow's Major mega-dealer, with a quick turnaround considered unlikely.

What was once among the world’s fastest-growing car markets has struggled to avert disaster in recent months. Now, Russian authorities hope to turn things around by borrowing an idea that’s worked in a number of other markets, including the U.S., throwing money at it.

The Russian version dwarfs America’s Cash for Clunkers program, however, and could eventually involve the investment of $20 billion over a 10-year period, with an initial $6 billion meant to yank the market out of its deep recession.

As in the U.S., that money will be used to stilulate demand for new vehicles – which plunged 49% last year – and to get off the road as many of Russia’s smoke-belching Ladas and Vazs as possible. But some of the money will also be used to train workers and to prop up the struggling home automaker, AvtoVaz, which still holds a 30% share of the market.

Global News!

“Our end goal is to build a modern auto industry in Russia, including the entire production chain — from the steel sheet to the end product,” Prime Minister Vladimir Putin said, in a statement quoted by the Detroit Free Press.

Nano-nano, as Mork might say, these days. The $3,000 Tata Nano is an example of the challenges faced by makers trying to succeed in the BRIC markets.

They may still be considered “emerging” markets, but China alone hs already laid claim to being the world’s largest automotive market and, according to a new report, just the four so-called “BRIC” countries alone will soon account for a full one of every three global car sales.

Competing in Brazil, Russia, India and China won’t be easy, warns the study, by he Boston Consulting Group, but carmakers and suppliers who try to survive in only the major industrialized markets will find it increasingly difficult to survive.

“This is a radical shift,” said Xavier Mosquet, head of BCG’s Detroit-based automotive practice. “By 2014, one-third of the world (demand) will be in those four markets.”

Free Subscription!

In 2007, those four countries generate sales of 15 million passenger cars. The number srged to 19 million last year, even as the developed markets of North America, Europe and Japan saw sales tumble. By 2014, the BCG study anticipates BRIC volumes will rise to a collective 25 million, while the industrialized markets will barely recover to pre-crisis levels of around 55 million.